What is a health insurance excess?
- By Willi Olsen
- Updated
You’ll choose how much excess you’re comfortable paying when setting up a health insurance policy. Your excess is the portion of a claim you agree to cover yourself before the insurer contributes.
For example, if you select a $500 excess and make a $3,000 claim, you pay the first $500, and the insurer pays the remaining $2,500.
Choosing a higher excess can reduce your premiums, while a lower excess means you pay more in premiums but less at claim time.
Put simply, the excess is how much you agree to pay yourself if you need to make a claim and you get to choose that amount based on what suits your budget and comfort level.
How does an excess work?
If your health insurance excess is $250 and your hospital bill totals $5,000, you would pay the first $250, and your insurance company would be responsible for the remaining $4,750. Most insurers offer a range of excess options, so the question becomes: should you choose a higher or lower excess?
Here’s the deal: the higher your excess, the lower your monthly health insurance cost.
It’s a good way to save if you’re not likely to claim.
But there’s a catch – if you do need to claim, you’ll have to cover more of the cost yourself.
The excess is the part you agree to pay, and the insurer picks up the rest.
You choose the excess level, which affects your monthly premiums and how much you’d need to fork out if something happens.
Benefits of having an excess:
Having an excess means you agree to pay part of the treatment cost if you make a claim. In return, your health insurance premiums are lower, so you save money each month or year. It’s a simple way to keep your cover more affordable, especially if you’re healthy and don’t claim often.
If you don’t make a claim, you don’t pay the excess. This means your total cost for the year stays low.
This can benefit individuals and families who want to keep monthly or yearly premiums down. It is a simple way to save money if you rarely need treatment.
How to choose your excess
As you’re exploring health insurance options, have you thought about how choosing the right excess could impact both your premiums and peace of mind?
There are two simple tips we usually share to help you make a more confident choice:
- Choose an amount you’re confident you can afford if you need to make a claim. Your excess is your contribution toward treatment costs, so it should be an amount you can realistically pay out-of-pocket.
- Start with a lower excess option. That’s because increasing your excess later is easy. It usually just requires notifying your insurer. Reducing your excess, however, often involves a new application and a fresh health assessment, which can be more time-consuming.
In short, starting with a lower excess gives you more flexibility. You can always move to a higher excess in future to reduce your premiums — but it’s harder to go the other way.
How to choose your excess
Whether you’re choosing a plan for everyday health needs or more comprehensive coverage, one of the most important features to understand is the excess, which is how much you’ll pay out of pocket before the insurer steps in.
The excess directly impacts your premium. A higher excess generally means a lower premium, while a lower excess results in higher premiums but less to pay when you claim.
Different health insurers in New Zealand handle excess differently. Some plans offer more flexibility with a wider range of excess levels, while others use simplified or unique cost-sharing models. The best option depends on how you want to balance day-to-day affordability with your ability to cover costs if treatment is needed.
Health Insurance Excess Options by Insurer (2024)
| Insurer / Plan | Excess Type | Applied When | Excess Options |
|---|---|---|---|
| Southern Cross Wellbeing One & Two | Dollar amount | Annual | NIL, $500, $1,000, $2,000, $4,000 |
| Regularcare & Kiwicare | Percentage (80% cover) | Per claim | Zero or $500 This $500 is in addition to the 20% you already pay per claim. |
| Ultracare | No excess | N/A | - |
| nib Ultimate Health / Max | Fixed dollar amount | Annual | Nil, $250, $500, $1,000, $2,000, $4,000, $6,000 Choose a higher excess to lower your premium. |
| AIA Private Health | Fixed dollar amount | Annual | Nil, $250, $500, $750, $1,000, $2,000, $4,000, $10,000 You can reduce your premium by selecting a higher annual excess. |
| AIA Upgrade: Specialist & Tests | Fixed dollar amount | Annual | Nil, $250 Optional upgrade to increase specialist & test cover, with a $250 excess. |
| AIA Cancer Care | Fixed dollar amount | Annual | Nil, $250, $500, $750, $1,000, $2,000, $4,000 Tailored cancer cover with multiple annual excess levels. |
| Partners Life Private Medical | Fixed dollar amount | Annual | Nil, $250, $500, $1,000, $2,000, $5,000, $10,000 Highest excess flexibility of any plan — up to $10,000 annually. |
| Partners Life: Specialist & Tests | Fixed dollar amount | Annual | $250 |
Who do I pay an excess to?
If you’ve got an excess on your policy and need to make a claim, that’s the amount you’ll pay straight to the hospital, specialist, or provider. It’s based on when you get the treatment, not when the bill’s paid.
When you lodge a claim, your insurer will walk you through what to do, including how the excess works.
And you’re not on your own. At LifeCovered, we’re here to support you the whole way. Whether it’s helping you understand your policy or how to handle the excess, we’ll make sure it’s all clear and straightforward.
Put simply, the insurer handles the payments, and we handle the people, so you’re never left in the dark.
After you’ve paid your share, your insurer will cover the remaining costs unless your claim includes outpatient treatment and you’ve chosen a reduced outpatient limit.
Example 1
- If your excess is $250 and your treatment costs $10,000, you pay $250 and the insurer covers the remaining $9,750.
If treatment continues into the next policy year, you’ll pay another $250, as the excess resets annually.
The excess is your share of the cost. Once paid, the insurer covers the rest if the claim meets policy terms.
Example 2
- If your treatment costs $1,000 and your excess is $1,000, you cover the full cost – your insurer pays nothing.
But once you’ve paid your excess for the policy year, it won’t apply again. For any additional approved claims that year, the insurer pays in full, unless another excess applies.
Example 3
- If your health insurance excess is $250 and your first treatment costs $200, you pay the full $200 – no insurer contribution yet.
At your next $100 treatment, you pay $50 to meet your excess, and the insurer pays the remaining $50.
Once you’ve paid the full $250 in a policy year, the insurer covers all approved costs for the rest of that year.
Example 4
- If your treatment has a policy limit, the insurer covers costs up to that limit – your excess doesn’t reduce it.
For example, with a $250 excess and a $500 treatment limit, you pay the first $250, and the insurer may pay up to $500 (not just the remaining $250), depending on the total cost.
Your excess is your contribution, and the limit is the insurer’s maximum payout. They’re separate, and understanding this helps set clear expectations when claiming.
FAQ's
What if I don’t claim at all?
If you don’t make a claim, your excess doesn’t matter — it only comes into play when you actually need to use your insurance. So if you’ve had a good run and haven’t needed surgery or hospital treatment, that excess amount you chose just stays in your back pocket.
Why do some people select higher excess?
Because it lowers the cost of their monthly premiums. They’re happy to save on their regular payments and are confident they can cover a bit more out of pocket if something major comes up. It’s a way of backing their own health while still having insurance there as a safety net if life takes an unexpected turn.
Can I change my excess level after purchasing a policy?
Yes, you can change your excess level after purchasing a policy. Increasing your excess is usually straightforward, you just need to notify the insurer, and no medical assessment is required. However, lowering your excess is more involved, often requiring a new application and full underwriting.
Not sure what excess is right for you?
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Disclaimer: The information in this article is for general guidance only and does not replace personalised financial advice. While every effort has been made to ensure the content is accurate and relevant, insurance policies, healthcare benefits, provider offerings (including nib, Partners Life, and others), and regulatory settings may change over time. This article may not reflect your circumstances or the latest industry updates. We recommend you speak with a qualified and licensed financial adviser for advice tailored to your situation. LifeCovered is here to help – our advisers are fully licensed and experienced in providing personalised insurance and financial guidance.
At LifeCovered, our job is to help you choose wisely. We’re paid standard commissions already built into your premium, so our advice is expert, unbiased, and completely free to you.